What is a Bankruptcy Discharge?
The entire goal of claiming personal bankruptcy is to eliminate your unsecured debts and this is achieved when you obtain a bankruptcy discharge. However, many people are confused by what a bankruptcy discharge actually is and how it works.
By definition, a bankruptcy discharge is a legal, court document that officially and permanently eliminates your unsecured debts. However, and more importantly, a bankruptcy discharge is the beginning of your fresh financial start.
By receiving your bankruptcy discharge papers, you are legally released from all debts covered under your bankruptcy. This means you are no longer liable for payments and you are legally protected from your creditors!
However, you should know that there are some debts which you cannot include in a bankruptcy.
Debts Eliminated by Bankruptcy Discharge
Bankruptcy covers almost all unsecured credit and debt. Personal bankruptcy in Canada will discharge:
- credit card debt,
- bank loans,
- unsecured lines of credit,
- finance company loans,
- payday loans,
- unpaid bills,
- loans from individuals,
- tax debts and
- certain student loans.
Bankruptcy and your discharge eliminate all unsecured debt, penalties and interest owing as of the date of your bankruptcy.
Bankruptcy does not however deal with secured debt like your mortgage, secured car loan or lease. In most instances you can keep these assets as long as you continue to make your monthly payments.
Debts Not Discharged in Bankruptcy
A non-dischargeable debt is any debt that cannot be included or resolved through bankruptcy.
Some examples of debts not eliminated in a bankruptcy:
- Spousal or child support payments
- A debt arising out of fraud
- Any court imposed fines and penalties
- Student loans if you have not been out of school for 7 years
- Restitution orders
Even if you have non-dischargeable debts don’t get discouraged. You still have options. Contact a Licensed Insolvency Trustee to review the specifics of your individual situation and then discuss all the available options with you.
Bankruptcy will not eliminate joint debts unless both spouses claim bankruptcy. To understand how joint debts work, read our article about bankruptcy and your spouse.
What Happens If My Discharge is Opposed?
It is possible for a creditor, the Superintendent of Bankruptcy, or your trustee to oppose your bankruptcy discharge. This usually happens if one of the following has happened during your bankruptcy period.
- You did not pay the agreed amount of surplus income.
- You could have filed a viable consumer proposal, but instead chose to claim bankruptcy.
- You refused, or neglected, to receive the required counselling sessions.
- A creditor objects to your discharge due to unusual or excessive transactions prior to bankruptcy
- Your bankruptcy was caused by gambling.
If your discharge is opposed, a court hearing, in bankruptcy court, will be held, and bankruptcy judge or registrar will determine the conditions of your discharge. Those conditions may include a longer bankruptcy period, or you may be required to make additional payments.
Types of Bankruptcy Discharge
There are four bankruptcy discharge types:
- Automatic Discharge. You completed all of your duties, and there were no objections to your discharge. In this case no court hearing is required. You may be eligible for automatic discharge in 9 months if you have no surplus income and this is your first bankruptcy.
- Order of Absolute Discharge. An Order of Absolute Discharge officially relieves you of the debts incurred before you declared bankruptcy, taking under consideration any exceptions provided in the Bankruptcy and Insolvency Act. A court hearing is required.
- Order of Conditional Discharge. An Order of Conditional Discharge means the court has imposed certain conditions that must be met before your bankruptcy discharge becomes absolute. For example, the bankruptcy court may require you to pay an additional amount for distribution to your creditors.
- Order of Suspended Bankruptcy Discharge. An Order of Suspended Bankruptcy Discharge means the bankruptcy court has ordered a delay so that your discharge will not be effective until a certain date. Your bankruptcy discharge may be delayed by an opposition on such grounds as an ongoing criminal investigation, or a breach of your duties as specified in the Bankruptcy and Insolvency Act, or due to a prior bankruptcy.
Bankruptcy Discharge – Your Fresh Start!
Receiving your bankruptcy discharge is the beginning of your fresh financial start. To learn more about claiming bankruptcy, or for specific answers about bankruptcy discharge, call or email us at Hoyes, Michalos & Associates today. Take advantage of our free, no obligation evaluation and get a quick and confidential review today by talking to one of our licensed professionals. Since 1999 people have trusted our team when they needed help to resolve their debts. We have successfully helped them and we can help you too.